Novartis, Sandoz In Tangle With Trade Channels Over Direct Drug Sales In India

Indian trade organization alleges the companies violated agreements by selling high-value drugs directly to patients, triggering a boycott of their products.

MUMBAI, India - A five-year-long dispute over drug sales with India's largest trade body - the Pharmaceutical Wholesalers Association - has returned to hound Novartis. The powerful trade association has boycotted all products from Novartis and its generics arm Sandoz in Mumbai, alleging that the two companies have been selling some high-value drugs directly to patients, thereby violating agreements over trade margins and also circumventing laws governing price control of drugs in India.

Dilip Mehta, an influential distributor of drugs and President of Pharmaceutical Wholesalers Association said, "Novartis sells products through its own depots and not routing them through proper trade. We, along with retail chemists, have been protesting against this practice for many years and now a resolution is very important as our losses are mounting."

Some of the important life-saving drugs that Novartis and Sandoz sell in India include Glivec (imatinib), Sandimmune (cyclosporine), Lar (sandostatin) and Femara (letrozole). A Novartis spokesperson told the media that "Many drugs sold in India require to be handled by specialists and under controlled conditions and so proper handling of the drugs are important." She denied violation of any Indian laws governing drug prices.

According to Mehta, for many years Novartis had been charging trade margins from patients and depriving distributors of the agreed margins. As per agreements between the trade and industry, wholesaler's margins are fixed at 8 percent while retail trade takes 16 percent margin on product which comes under government's Drug Price Control Order. For drugs not under price controls, the trade margins are fixed at 10 percent and 20 percent for wholesalers and retailers respectively.

Requesting confidentiality, an executive from a large Indian pharmaceutical company said that traders have no legal grounds to stop selling life-saving drugs. "They are violating laws by disrupting drug supplies to the needy patients," he said. In the past, on many occasions drug traders, which number over 500,000 in India, have stopped supplies on issues such as trade margins.

Trade associations like the All India Organization of Chemists and Druggists and the Pharmaceutical Wholesalers Association form a vital part of the drug supply chain, and all pharmaceutical companies have to sign agreements before the products are launched in the market.

"A mass boycott by the trade could mean definite fall in sales volumes and a dip in profit especially in large cities like Mumbai, and Novartis will not be able to afford this if it continues for a longer period," a stock market analyst cautioned.

In a move expected to give better operational flexibility, Novartis recently announced its plans to increase its equity stake in its Indian arm to 90 percent. ¹ (Also see "Novartis Wants Tighter Grip Over Its Indian Ops; Announces Open Offer To Up Stake To 90%" - Scrip, 25 Mar, 2009.).

- Vikas Dandekar ([email protected])

[Editor's note: This article appears courtesy of ² PharmAsiaNews.com , F-D-C Reports' new site for Asian biotech and pharmaceutical news. ³ Register for a 30-day risk free trial.]